Climate change and aviation: Fudge now, pay later? Pressures of time and substance

By Chris Lyle, Chief Executive, Air Transport Economics. With little time left before the crucial UNFCCC meeting in Copenhagen in December at which a post-Kyoto agreement is expected to be reached, there is no clear picture of how aviation will be treated.

Pressures of time and substance

Under Kyoto, targets for the reduction of Greenhouse Gases (GHGs) were established only for the Annex I Parties (industrialized countries). Even these targets apply only to emissions from domestic aviation and exclude those from international aviation, which was given separate treatment: Annex I Parties are only “committed to pursue” limitation or reduction of GHGs from international aviation, “working through ICAO”. Thus emissions targets for only some 22% of world air transport are covered by Kyoto – further reduced to less than 5% in practice since the Protocol was not ratified by the United States.

Ongoing improvements in technology, operations and infrastructure have produced significant improvements in the intensity of carbon-based fuel consumption before and during the life of Kyoto. But growth in air traffic has continued to exceed these improvements by a sizeable margin, a condition which is likely to continue for the foreseeable future without a paradigm shift in policy and practice, notably to establish targets and to incorporate economic instruments for mitigation of aviation emissions at a global level.

There is increasing public clamour and government pronouncement, at least in many developed countries, for international aviation to be included more substantively in a post-Kyoto agreement. Yet at this late stage some key questions have yet to be resolved, or in some cases even substantively addressed:

1) Would international aviation emissions somehow be incorporated in national inventories or would they be treated on a sectoral basis?

2) Would these emissions be subject to targets by all Parties, by just Annex I Parties, or by some other partitioning consistent with the UNFCCC principle of Common But Differentiated Responsibilities (CBDR)?

3) Would the targets be based on absolute volumes emitted or on intensity-based emissions (for example per revenue-tonne kilometre), or on both (depending, for example, on route flown or principal place of business of the carrier)?

4) Should international aviation be given access to global carbon markets such as Kyoto’s Clean Development Mechanism and Emissions Trading (the sector is presently excluded from access because of its particular treatment under the Protocol)?

5) Should ICAO continue to be the “delegated authority” or should international aviation be brought more directly under the framework of the UNFCCC and aligned with treatment of other sectors?

Post-Kyoto negotiating texts

Draft negotiating texts for the treatment of international aviation at Copenhagen are presently a mishmash of proposals by individual States and the European Union, lacking coherence. One increasingly plausible outcome, however, is that COP/15 will produce a mandate for establishing a global sectoral framework, including targets, and a timetable for action with a final report back at COP/17 in 2011.

There is also momentum for an International Air Passenger Adaptation Levy. Collection would be by airlines at the point of ticket sale and all revenues, except for administrative costs incurred by the airlines, would be directed to the Adaptation Fund set up by the Kyoto Protocol. This would fall within the framework of the much broader-sourced World Climate Fund which has been proposed in the UNFCCC, whereby contributions would be made by States, determined by criteria such as GHG emissions, population and GDP. The Passenger Levy is not designed per se to mitigate emissions from international aviation, although at least it has a commendable objective, which is more than can be said of the United Kingdom’s Air Passenger Duty.

The pre-Copenhagen negotiating sessions continue in Bangkok (28 September to 9 October) and in Barcelona (2 to 6 November).

ICAO activity

In “separate but parallel” activity, ICAO has not only continued the technical work by its Committee on Aviation Environmental Protection, CAEP) but, following the failure of its Assembly in 2007 to reach total consensus, established a high-level Group on International Aviation and Climate Change (GIACC) to develop strategy. The ICAO Council reviewed the final outcome of the work of GIACC in June 2009 and agreed a Programme of Action that included the following:

A strategy for efforts to achieve “global aspirational goals” of improvements in average fuel efficiency of international aviation operations at the rate of 2% per annum, in three time period tranches (base year undefined): (i) to 2012 (when the Kyoto Protocol targets expire); (ii) to 2020 (when the post-Kyoto agreement targets are expected to expire); and (iii) from 2021 to 2050.

No attribution of specific obligations to States, but adoption of a basket of emissions reduction measures developed by GIACC, from which States may pick and choose.

GIACC recognized that the aspirational fuel efficiency goals would likely be inadequate to counter the ongoing growth of international air transport, which would therefore continue to increase GHG emissions in absolute terms in the absence of some form of regulatory mechanism. However, the Group, as with CAEP and the Assembly before it, was unable to reach agreement on the application of economic instruments, primarily because of differences regarding whether and how to apply CBDR.

ICAO has convened a High-Level Meeting (HLM) on International Aviation and Climate Change in Montreal from 7 to 9 October to review the programme of action recommended by GIACC.

GIACC had not been mandated to address the key questions above and the HLM is only now being invited “to consider whether ICAO should present a global framework to address the impact of international aviation on climate change to COP/15”.

Industry proposals

Recognising a need for a broader scope of address regarding the inclusion of international aviation under a post-Kyoto agreement, some airline groupings have been developing and promoting their own positions.

IATA now has a set of three sequential goals for all commercial operations by all air carriers as follows:

an average annual improvement in fuel efficiency of 1.5% from 2009 to 2020;

carbon-neutral growth from 2020; and

an absolute reduction of 50% in carbon emissions by 2050, relative to 2005 levels.

IATA’s goal of carbon-neutral growth from 2020 recognizes that it may be somewhat speculative to assume today that technology, operations and infrastructure will produce the necessary improvements in fuel efficiency and assumes the purchase of carbon credits as may be required (these would, of course, become scarcer and more expensive as time goes on). ICAO has not been able to reach agreement on market-based measures or carbon-neutral growth, despite intensive examination of these issues over a number of years.

IATA has called for a global sectoral approach under which aviation’s emissions would be capped and accounted for globally, not by States. The primary focus of a global approach would be on international aviation but any proposals would be adaptable to include domestic aviation through an opt-in system for States. Aviation emissions would be treated as an indivisible sector total and not apportioned to individual States, although an approach might be crafted specific to the various types of aviation markets, where the same requirements apply to all operators competing in the same market, but different requirements apply to different markets (a nod of the head to CBDR).

The Association of European Airlines (AEA) has also called for a global sectoral approach. Under the AEA proposal, countries would be grouped into three ‘Blocs’ according to the maturity of their aviation markets (a number of criteria being put forward to determine the level of maturity, another interpretation of CBDR). There would be differentiated target setting for the three Blocs, but equal treatment of all air carriers operating within the same Bloc. For traffic between two Blocs there would be application of the lower target to all carriers, regardless of nationality.

A specially formed Aviation Global Deal Group (AGD Group) – Air France-KLM, BAA, British Airways, Cathay Pacific, Finnair, Qatar Airways, Virgin Atlantic, Virgin Blue and The Climate Group – has also called for a global sectoral approach. There would be global emissions reduction targets, with indicative scenarios ranging from 0 to 20% by 2020 and 50 to 80% by 2050, compared with 2005. The aviation sector would be integrated within the overall climate framework with open access to global carbon markets from 2012, and a UN body administering the system. Like IATA, the AGD Group suggests that, should they so wish, countries could choose to transfer their domestic aviation emission allowances into the international inventory. (The AGD Group airlines seem to be hedging their bets – all but Virgin Blue are Members of IATA, three are on the IATA Board of Governors and the CEO of Cathay Pacific is actually Chairman of the Board!).

Up, up and away?

What is lacking at the present time is a strategic vision for the aviation sector, to pick up and mould the positions of the airline groupings, to rise above the cumbersome technicalities and finer points of the ICAO process, and to find a way of reconciling the divergence between the principle of CBDR amongst countries and principles in aviation’s Chicago Convention of non-discrimination amongst operators.

The stakes are high. Failure to achieve a global framework produces the prospect of a potentially duplicative and conflicting patchwork of taxes, duties and cap-and-trade schemes, including some elements without demonstrated environmental benefit. Also, in the absence of a global solution, traffic flow may be diverted to or via less costly carbon-levied points – such ‘carbon leakage’ distortions are environmentally unhelpful. Potentially long-drawn out, expensive and costly legal actions, notably against the inclusion of non-European operators in the European Emissions Trading Scheme, will be on the table, adding further uncertainty. Even more critically for the long term, continued exemptions for international aviation from regulation of GHGs (to add to those for fuel and VAT) would only add fuel to the fire of opposition to aviation expansion (the fracas regarding LHR’s third runway provides an example).

Hopefully the participants at ICAO’s HLM next month will help the Organization stretch its vision towards Copenhagen and then in the ongoing process towards adoption of an agreement on post-Kyoto targets and governance for international aviation by the UNFCCC. This will not be easy – the HLM was originally intended as a coronation of an anticipated broader and more substantive GIACC outcome, a major public relations exercise; all 190 ICAO Member States and no less than 139 international organizations have been invited, the documentation from the Secretariat is exhaustive, and in practice there will be only two working days, since the third will be devoted to adopting a Declaration.

After Copenhagen, ICAO will undoubtedly be involved in some way in developing the implementation mechanism for international aviation. For that, ICAO may need look beyond its traditional procedures, for example in creating a forum for discussing and directing the task which is more open (GIACC met behind closed doors) and more inclusive of industry, NGOs and partners (which presently are the ones taking the initiative). The process also needs to be flexible and set tough time targets – the ICAO Assembly Session in late 2010 is likely to be critical. Fortunately, ICAO has a new Secretary General in the form of Raymond Benjamin, former Executive Secretary of ECAC and Chief of ICAO’s Aviation Security Branch, with considerable experience of environmental issues and known to be committed to environmental protection as one of the three pillars for the future work of the Organization (the others being safety and security). With knowledge of the system, but without political baggage and open to new ideas, he may well be up to the challenge of recovering ICAO’s leadership role on aviation and climate change.

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